Lessons from Nintendo & Breaking from the Managed Services Pack

An often quoted Albert Einstein definition for insanity is “doing the same thing over and over again and expecting different results.” Based on this definition, most of us must be one card short of a full deck.  Our tendency in business is to play it safe and follow the pack; yet, none of us goes into business with the goal of being average.

History teaches us that those who break from the pack and discover new ways of doing business reap the rewards. Take the development of the latest generation of game consoles as an example. The three industry leaders - Sony, Microsoft and Nintendo - were in heavy competition trying to win the top spot in market share. Sony and Microsoft took the predictable route; extending their platform’s key features – better processor, improved graphics and the latest technological developments (i.e. Blu-ray, Wi-Fi). This inevitably led to higher priced consoles with greater per-unit costs and consequently slimmer profit margins. Nintendo, borrowing a phrase from Apple, “thought different” with their approach. What if the new Nintendo game console (the Wii) did not compete on speeds and feeds, but instead tried to attract a whole new generation of gamers? What if this unit incorporated motion into game play and mimicked real-life activities (addressing the anti-social, coach potato criticism typically made of this form of entertainment)? The resulting product changed the market dynamic for video games from an audience that was mainly male and under 30 years of age, to an entirely new target group that broke through gender and generations:  from young children to grandparents, and everyone in between. Because the Wii was not competing on expensive features, but by introducing a whole new industry dynamic, Nintendo could sell their console at a much lower price. The manufacturer reaped the rewards of this non-traditional approach, capturing almost 50% of the game console market worldwide, as of the end of 2009.

CompTIA’s MSP Partners 2010 research clearly shows the same dynamic for MSPs — those who break from the managed services pack and apply industry best practices end up reaping the rewards. Best in class MSPs boast profit performance 158% better than average MSPs in 2010. But these best practices are not “common practices”— that is, a list of behaviors typical among MSPs (it stands to reason that if we diligently study and apply common practices; our results will be, well, ordinary). Instead, these best practices are key performance indicators (KPIs)—unique actions or behaviors that differentiate successful companies from average ones. Through our extensive industry research, we identified and analyzed the top 20% of MSPs and determined seven core KPIs that set these leaders apart from their peers.  As you look at this list, be aware that 80% of your peers, by definition, are not following these best practices. It should not be a surprise that you don’t see these behaviors widespread throughout the industry; remember, you are charting new ground and looking at the novel behaviors that will generate different results.

In subsequent blog posts, I will examine each of these seven managed services best practice KPIs in more detail. The 2010 list includes:
1.    Define and execute a strategy for growth
2.    Develop and deploy new technology solutions
3.    Invest in & execute marketing programs
4.    Sell beyond the IT department
5.    Invest to build a services practice
6.    Optimize your organization & billable resources
7.    Invest in & develop your humans

Note that these are ranked in order of impact on the business’ profitability, with the first being the most important. You can learn about these seven MSP best practices and many other managed services-related topics through CompTIA MSP Partners’ extensive online education courses at www.msppartners.com.